Rail operator CSX reduces locomotives in maintenance program

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Oct 18 (Reuters) - CSX Corp, the No. 3 U.S. railroad operator, will slash the number of locomotives served by a long-term maintenance agreement, a move that cuts service bills under the agreement by some $3.3 billion, company filings showed on Wednesday.

CSX said it exercised “certain rights” this past August under a maintenance program contract in place though 2031 that allowed it to sharply reduce the locomotives in the program, according to the company’s 10-Q.

As a result, the remaining payments decreased from about $5 billion at the end of December 2016 to an estimated $1.7 billion at the end of September, CSX’s filing said.

“Expected future costs may change as required maintenance schedules are revised and locomotives are placed into or removed from service,” the company said.

Company spokesman Rob Doolittle did not immediately respond to a request for comment. It was unclear who was losing the maintenance business and how the locomotives taken out of the program would be serviced in the future, or whether they would be moved into storage.

The decision frees CSX from service obligations under the contract but it was unclear how much money the company’s changes would save.

The changes are part of a broader overhaul underway at the Jacksonville, Florida-based operator since March under newly appointed Chief Executive Officer Hunter Harrison.

Harrison, who has vowed to cut costs and boost efficiency with his “precision scheduled railroading” strategy, has mothballed locomotives, closed rail yards, lengthened trains, and slashed overtime pay and hundreds of jobs. (Reporting by Eric M. Johnson in Seattle; Editing by David Gregorio)